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Autonomous VehiclesBusinessNew TechNewsStartupsTechnology

Amazon is serious about self-driving technology, eyeing multibillion-dollar acquisition

Amazon is under discussion with self-driving technology startup Zoox in an acquisition attempt that would value the company at less than the $3.2 billion it had when it raised funding in 2018. As reported by The Wall Street Journal, the companies are still in talks, and a finalized agreement might not be reached for several weeks. 

Zoox was founded to develop software and hardware needed to create an ecosystem of electric-powered self-driving taxis, which users can call on via a smartphone application. Zoox’s idea is built on three distinct trends within the transport industry – autonomous driving, vehicle electrification and on-demand cab-hailing. 

It is here that Zoox might have bitten off more than it could chew. All three trends have highly specialized and extremely well-funded startups, mobility businesses, and automakers fighting to gain space within individual markets. For a startup like Zoox, realizing its vision meant massive financial injections. 

But as investors understood the complexity and financial burden of developing self-driving technology, they increasingly shifted their investment towards established market leaders like Alphabet’s Waymo and GM’s Cruise, leaving early- and mid-stage startups in the lurch. 

Amazon’s interest in Zoox is in line with its investment in self-driving startup Aurora Innovation; it was part of the company’s $530 million investment in 2019. Amazon also invested heavily in electric car manufacturer Rivian, while also placing an order for 100,000 delivery vans from the company by 2030. 

For Amazon, investing in transport-related innovation is crucial as a bulk of its operational expenses are shipping-related costs. In 2019, Amazon’s shipping costs were roughly 12% of its gross merchandise value (GMV). The company is also expected to have a compound annual growth rate of 24% till 2023. Without any noticeable improvement in shipping operations, Amazon’s shipping costs will amount to $90 billion by 2023.

Morgan Stanley’s Brian Nowak believes that Amazon could save over $20 billion in annual recurring shipping costs if the company continues to focus on self-driving technology. “We think autonomous technology is a natural extension of Amazon’s efforts to build its own third-party logistics network,” said Nowak.

Though vehicles with SAE Level 5 automation are still under development, existing Level 4 automation can be used by long-haul trucks to move freight. This is because highways are generally less chaotic than city roads, providing an easier-to-navigate driving environment that can be handled by technology’s current level of sophistication.

That said, Amazon’s involvement in the autonomous vehicle (AV) space would not necessarily stop at providing for its own logistics needs. If Amazon can perfect self-driving technology, it can essentially create its own on-demand cab-hailing platform and deploy robo-taxis as direct competition to the likes of Uber and Lyft. Running robo-trucks on American highways could also be a starting point for Amazon to expand into the logistics forwarding market.

The market leaders within the AV segment have been Waymo and Cruise, both profiting from being one of the earliest to the business. Extensive simulated driving tests and a large number of pilot runs on city roads have helped the companies incrementally improve their technology.

As of 2019, Waymo vehicles clocked 13,219 miles on average before they required human intervention, while Cruise vehicles clocked 12,221 miles on average before taking assistance. No other competitor in the market has yet crossed 5,000 miles on average without needing human intervention in an actual physical driving environment. 

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Vishnu Rajamanickam

Vishnu predominantly covers technology stories from within the logistics and transportation space. He connects with key stakeholders within the freight industry, profiles startups, and brings in perspective from thought leaders in the freight space.

4 Comments

  1. Hmmmm. If Amazon dominates self-driving like they do with online retail it would put a lot of huge trucking companies out of business in 10 years and all the jobs they support with it.

    We need to ask ourselves if we really want that. Amazon will dominate as it’s in their DNA to do so. Do we want that?

  2. There are many companies that are now looking at developing driverless technology. While many are concerned about brokers taking an unfair cut of the revenue, (everyone has a different idea of what is fair) At least there is revenue for a driver. Judging by this article Amazon’s goal is to put carrier’s, drivers and brokers out of business.

    Maybe we should be focusing on saving jobs in this country.

    1. I don’t think too many people don’t see how this is inevitably a closed circle that will end up with humanity biting itself in the butt. More autonomy means more waste (more plastics, metals,batteries, etc)same goes to Amazon planning on selling more stuff, especially when it goes to shipping tube of toothpaste in the box big enough to fit laptop. Then, at the same time, with more autonomous robots doing all that work, means lot of people will be out of work, so where will they get money to buy stuff ?!
      We can go on, and on, and on, but we all understand that all these companies need is to make enough money in time to gain all the power by the time everything comes crashing down.

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